Dáil: Thomas questions Minister Noonan on the Financial Transaction (Robin Hood) Tax

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Updated: 3rd October 2016

QUESTION NO: 8

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)
by Deputy Thomas Pringle
for ORAL ANSWER on 29/09/2016
To ask the Minister for Finance if he will back the European FTT initiative and support the introduction of the FTT here; and if he will make a statement on the matter.

REPLY.
Ireland already has a tax on financial transactions, a Stamp Duty on transfers of shares in Irish incorporated companies, which currently stands at 1%. The yield from this charge in 2015 was €424.13 million and I understand receipts to end August 2016 were over €260 million.

The Financial Institutions Levy I announced as part of Budget 2014 is a revenue raising measure which provides for a contribution from the banking sector to Ireland’s economic recovery. The levy is in place for the years 2014 to 2016 inclusive with an anticipated annual yield of €150 million. As the levy is a percentage of an institution’s DIRT liability in 2011, liability to the levy relates to the size of an institution’s Irish operation. The entire banking system has been underpinned by the strong Government support provided both here and abroad and I believe it is appropriate therefore that the banking sector should make a contribution to the State’s economic recovery. Accordingly, I announced in my Budget 2016 statement that I propose to extend the levy out to 2021, subject to a review taking place of the methodology used to calculate the levy. This will bring in an additional €750 million over the period, which is a very significant additional contribution to the Exchequer.

In relation to discussions at EU level, the Government’s position is that a Financial Transactions Tax would be best applied on a wide international basis to include the major financial centres to prevent the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. Notwithstanding this, the Government is not prepared to stand in the way of EU Member States that wish to work together to implement a Financial Transactions Tax and in this regard adoption of a decision formally authorising enhanced cooperation took place during the Irish Presidency of the EU in January 2013.

The proposal for a Directive from the European Commission in the area of financial transaction tax was published in February 2013. Ireland had many concerns about the proposal as drafted, not least of which were the potential impacts on, and the trading of, Irish Sovereign debt in the secondary market and in total, the potential negative impact on the liquidity of the financial sector as a whole. Members of the Economic and Financial Sub-Committee on EU Sovereign Debt Markets have stated that the introduction of the FTT would have a significantly negative effect on Sovereign Debt Markets and may impair the good functioning of secondary markets for sovereign debt resulting in reduced liquidity, reduced investor demand and therefore higher financing costs for States.

Our concerns are widely shared amongst the Member States, including some of the participating countries. These concerns have led to the issuing of a communique by the participating Member States, announcing that they have agreed to implement a financial transaction tax in a progressive manner, with the first step being a charge on shares and some derivatives.

On 17th June 2016 the ECOFIN Council discussed the current state of play with regard to the proposal of a number of Member States to introduce a financial transaction tax. In the context of this discussion, ten of the original eleven Member States (Estonia has indicated that it no longer supports the proposal), issued a statement setting out their agreement on the core design principles of an FTT. The statement indicates that further reassurances were needed on two issues in particular, for which two task forces will be immediately set up. First, taxation of derivatives should not have a negative impact on public borrowing costs. Second, tax collection should be cost-effective. The outcome of these two task forces was to be discussed in September. We understand the task forces have had some discussions but that significant differences of opinion remain.

Much uncertainty remains therefore as to the form the FTT might take and more detail would be needed on the final shape of the tax before a definitive conclusion could be reached about its impact on Irish taxation revenue.

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